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George J, Kelly, Director
12 East 36 St., New York 16, N Y.
MU 5-5100


Address of M. Monroe Kimbrel, President of The American
Bankers Association, before the 38 th Annual Convention
of NABAC, The Association for Bank Audit, Control, and
Operation, Americana Hotel, Bal Harbour, Florida,
Monday Morning, October 22, 1962 . Mr, Kimbrfel is chairman
of the board, First National Bank, Thomson, Georgia,
It is indeed a pleasure for me to be here today and extend greetings
on behalf of The American Bankers Association.

To this I would like to add my

own personal compliments to NABAC for the fine job it is doing in a field that is
growing more important to banking every day.
As you know, my term of office as A.B.A. president has just started.
My thoughts, therefore, are directed toward the future.

So with your permission

I would like to spend the next few minutes discussing some of the major
developments that will be affecting banking in the near future.
To sum up banking*s near-term outlook briefly, it would be fair to say
that banking is going under a microscope.

Our industry is going to be scrutinized

(1) by the general public, (2 ) by Congress and the federal departments and
agencies dealing with banking, and (3 ) by bankers themselves.
Let*s take a further look at these three developments.
Banking in the Public Eye
Next year will be the Centennial year of our dual banking system.


February 25, 1863 , Abraham Lincoln signed the National Banking Act, commonly
referred to as the National Currency Act, which, in effect, gave birth to our
dual banking system.

It marked the beginning of banks chartered and supervised

by the Federal Government operating side by side with the banks chartered and
supervised by the several states.




This celebration is definitely in order, for the system has served the
nation well.

But more than that, the Centennial provides banking with the best

opportunity it has ever had to tell its story to the public.
For some time the Centennial Commission of the A.B.A, has been working
on a program to assure success of the year-long observance.
are along three lines:

(l) The Commission plans to arrange special events which

will focus attention on the Centennial.
publicity campaign.

The Commission’s plans

(2) It plans to conduct a nationwide

(3) It is preparing materials to enable banks and bank groups

to participate in the program.
To start off the Centennial year, the Commission expects that President
Kennedy will issue a proclamation declaring 1963 the Centennial year of the dual
banking system.
A 250-page hard-cover book on the history of banking, entitled "Financing
American Enterprise," will be released early next year.

The book has been written

by Dr. Paul Trescott of Kenyon College, Gambier, Ohio, and is being published by
Harper and Row of New York.

I am confident that this book will be accepted as a

major contribution to our knowledge of our banking system, and recommend it to you
for your personal enjoyment.

Banks which have contributed to the Centennial will

receive a copy of the book, and they will be able to order additional copies at
a very low cost for distribution to schools, libraries, and customers.
In addition to the hard-cover book, a short booklet--"How Banks Help"-which is about 50 pages long, has been' written by John Cooley, former-©enior associate
editor of BANKING Magazine,

This interesting, informal booklet, also historical,

tells the story of the growth of a wide range of banking services through a series
of facts and human-interest stories.

It will be available to banks for mass

The A.B.A. Public Relations Committee is producing a l6mm full-color
motion picture entitled "Banking in Action."


It will depict the growth of the



nation in the past 100 years and show how commercial banks played a leading role
in the growth.

Banks will he able to purchase or rent the film.

To top off the celebration, the A.B.A. will hold its Annual Convention
in Washington, D. C., next October.

The whole Convention will be keyed to the

Throughout the year, the national publicity campaign will be intensive.
The campaign will include all major media— newspapers, magazines, radio, and
To help banks and bank groups develop local programs, the Commission
has prepared a Centennial Kit which will reach all banks in a few weeks.

The kit

will contain lists of all materials available, sample news releases, newspaper
ads, TV and radio scripts, a booklet containing ideas on how banks can participate
in the celebration, and many other items.
The four objectives of the Centennial are:

a) to commemorate the

100 th anniversary of the dual banking system; (2 ) to focus nationwide attention

on the Centennial observance; (3) to point out the service that commercial banks
render; and


to develop a greater appreciation of the role of the commercial

banking industry in the economy.
The theme of the Centennial is "Progress Through Service." This theme
gives us a chance to highlight the progress banking has made and also a chance to
explain to the public the variety of services available at a commercial bank.
The celebration will place banking squarely in the public eye.


should welcome this development, and I am confident the banking industry, will
stand up well under the public*s scrutiny.
Washington Scene
The banicing industry is also being scrutinized in the nation*s capital.
The most talked about subject in banking circles today is the report of the




so-called Saxon Committee. As you know, the committee of


men was appointed by

the Comptroller of the Currency to study the national "bank system*

The committee

submitted 8 ^ recommendations in its report.
The committee should be commended for its outstanding service to

I do not imply that all bankers will agree with every single •


In fact, the A.B.A. recorded last month its opposition to the

proposal for national bank branching privileges irrespective of state laws regarding,

But in spite of any specificdifferences of opinion, we all should

be grateful for any attempts to make objective and comprehensivestudies aimed at
improving our banking system.
A detailed study of the Saxon Committee report at this time might be
an academic exercise.

As you know, the report was turned over to the President’s

Committee on Financial Institutions.

This committee, headed by Walter Heller of

the Council of Economic Advisers, was one of three committees established by
President Kennedy to study the recommendations of the Commission on Money and
Credit, as well as other proposals for improvements in the nation’s financial

The committee also is expected to make independent recommendations.
The three committees are to report to the President next month so that

any legislative proposals can be incorporated into the Administration’s legislative
program for next year.
When the Heller Committee submits its recommendations, the A.B.A. will
study each and every one of them in detail.

We will support those measures or

actions which we believe will improve the operation of the dual banking system.
At the same time we will oppose those measures which we feel would not be in the
public’s interest.
During this period of deep probing of our financial structure, I would
hope that all bankers join in the discussion so that all views are thoroughly aired.




This is the best way to arrive at sound conclusions.

But I also would hope that

all those who do enter the debates that lie ahead will base their arguments on
facts and strictly objective analyses of the proposals.

The stakes are too high

to permit emotions or guesswork to enter the considerations.
This past year organized banking showed that it can be effective in the
nation’s capital.

Every piece of major legislation supported by the A.B.A. was

In the struggle for tax equality* we had sound arguments and we presented

them accurately and fairly.

Commercial banking won a major legislative battle.

If we follow this same practice and present sound views backed by solid
facts* I don’t think we will have to worry about the future of banking as it may
be influenced by the current scrutiny in Washington.

Maintaining Profit Margins
The American economy is going through a period of readjustment.

In the

years following World War II* our industries were running at near-capacity levels
to fill the pent-up demand both at home and abroad.
Europe was drastically reduced by the war.

The productive capacity of

We had little competition in Europe*

nor did we face competition in markets previously served by European producers.
This is no longer the situation.
depression and the war has been filled.
been phenomenal.

Much of the demand built up through the

At the same time European progress has

The result is that competition is more realistic.

The competitive element is evident in international trade.
evident in our domestic economy.

It is

And* needless to say* it is growing more

intense in the field of banking.
During the past few years* banks have found it increasingly difficult to
maintain profit margins.

The reasons are fairly obvious.

expand as expected after the last recession.

Loan demand did not

At the same time* barks were faced

with increased competition within the industry and with nonbank lenders.
I am sure this group is well aware* operating costs continue to climb.


And* as



Our customers have sharpened their pencils.

They want the best terms and

the best service available.
Needless to say, the banks that will come out ahead in this competitive
period will be the banks that can offer the best service at the lowest cost.


higher permissible rate on savings and interest deposits brought to light many
facts for bankers across the country.

Some discovered after they had raised rates

that the opportunities for profitable outlets for new savings were seriously

Some wanted to increase their investments in mortgages but lacked

qualified personnel.

Others found themselves looking around for experts in the

consumer loan field.

Many discovered that they did not have an accurate picture

of what their savings operations cost their banks.

The change in Regulation Q

has inserted an element of keener competition into banking, and this competition
has underscored the need for technical and specialized skills which will strengthen
the basis for bank management decisions and promote greater flexibility in meeting
the challenge of competition.

The stiffer the competition, the costlier are

errors of judgment.
In other areas, as well, recent developments have underscored the need
for specialized skills in banking.
The number of farmers has been decreasing for many years, but the size
of the farm and the credit needs of farmers have increased.

To meet this situation

many banks, including large city banks, have been adding agricultural
specialists to their staffs.

With the increased emphasis on international trade,

banks are being forced to develop experts in international finance.


competition has also spotlighted the need for more extensive market research
by banks.
Gentlemen, the trend is quite evident.

Tomorrow*s bankers will not only

have to have a greater understanding of the broad aspects of banking; they will
also have to have specialized skills and training in particular fields.



You men are right in the middle of this trend.

Senior management will

be relying on you more than ever for your expert guidance in cost analysis,
controls, and, to some extent, general bank operations.
Banking has just barely opened the door to automation.
way to go.

We have a long

Automation will enable us to perform our present services faster and

more effectively.

It also opens the way for new services.

The changes coming about through automation should make your work
extremely exciting in the years ahead because it will present you with new tools,
new techniques, and new challenges.

In the field of check processing we may see volume increase by 28 per
cent during the next 8 years.

By 1970 it is estimated that the banking system

will process 18-billion checks annually, compared to the present annual volume
of l4~billion.
If we are to meet this increased volume— and other increasing demands
on our banking system--without excessive increases in costs, real imagination
will be required.

Your organization already has shown such, for it was one

of the first to realize the need for specialists in the field of bank audit and

In fact, your organization originally was founded as part of the

Clearing House Section of the A.B.A.j and the A.B.A., recognizing the specialized
field, gave its blessing to your desires to establish an independent organization.
Through the years the A.B.A. has supported the work of NABAC and has
cooperated with your organization on many matters of mutual interest.

The A.B.A.

has not attempted to concern itself with matters primarily under the aegis of
Inefficient duplications of activities have been avoided.


at least in one area--this happy state of affairs has become jeopardized.
area is personnel administration.

Since it is a matter of considerable concern

to the A.B.A., I would like to discuss it candidly and frankly.





In recent years* HABAC has been expanding its interest in the field of

The A.B.A. has always felt that the personnel and management

development functions of a bank were germane to the work of the A.B.A. because the
A.B.A. is charged with the broad responsibility of servicing the full spectrum
of bank functions.

The A.B.A. has been doing work in the field of personnel and

management since the 1920*s During the past decade we have stepped up our
efforts in this field.

With the increasing importance of personnel work in hiring*

training* and assigning employees* and with the acute need for management
development* we plan to increase further our services in the field of personnel

In fact* next spring the A.B.A. will start offering a one-week

course in bank personnel administration.

This course will be in addition to the

A.B.A.*s Rational Personnel Conference and the Effective Leadership in Management

The one-week course will be designed to give the personnel officers of

smaller and medium-sized banks intensive training in the basic principles of
personnel administration and practical suggestions as to how they may be applied
in their banks.

The course will also provide newcomers to personnel administration

in large banks an intensive exposure to the personnel function.
This course was originally considered over five years ago.

However* its

implementation was delayed pending the completion of the Welman Committee's report
on banking education.

This was a committee established to make a comprehensive

study of banker education programs.
The Welman report recommended that the A.B.A. proceed with its plans
along these lines.
the A.B.A,

The recommendations were approved by the governing bodies of

Last year* however* when the A.B.A. was ready to announce its plans*

it discovered that HABAC was ready to announce plans to hold two workshops some­
what similar in nature. At this point the A.B.A. notified HABAC that it would
hold off for one year in order to avoid what seemed to be a direct conflict of




scheduled programs.

At the same time the A.B.A. made it clear that it would go'

ahead this year with its original plans.
Last month at the A.B.A, Administrative Committee meeting in Atlantic City
the entire situation was again reviewed.

This group— the ruling "body of the A.B.A.-

discussed the personnel situation in some detail.

The members unanimously agreed

that the personnel administration and management development functions properly
belonged under the aegis of the A.B.A,

It was also agreed that the A.B.A. would

continue to provide programs and services in this area.
I hope that WARAC officials will reconsider this situation so the two
banking units again can show a unity of purpose.

With bankers scrutinizing their

own operations, this situation could well raise questions in the minds of senior
management of the nation*s banks about duplication in the expenditure of time
and money.
In closing, I want to say that the months ahead will be mighty important
to the future of banking.

The Centennial, the far-reaching studies of banking

practices and regulations, and the efforts of bankers to improve their own
operations will put a great deal of pressure on the banking industry.
as I said earlier, banking should welcome this broad scrutiny.
system that has served so well will be reasserted.
be sharply defined so that we may eliminate them.
gain much during this period of scrutiny,




The strength of the

Weaknesses of our system will
In brief, banking stands to